Congressional panel investigates major CA unemployment fraud

WASHINGTON

California’s unemployment system, plagued by multibillion-dollar fraud schemes involving COVID-related benefits, is under investigation by the Republican-led House Oversight and Accountability Committee.

The committee plans its first hearing of the new Congress on Wednesday on the federal unemployment program and the unemployment systems in California, New York and Pennsylvania. Federal law enforcement and surveillance officials must testify.

The committee expects many more such hearings in the future. Reviewing COVID-related spending is a top priority for Chairman James Comer, R-Ky.

“Democrats in the administration and in Congress have spent far too long getting money out of the way and far too little time doing meaningful oversight of how that money is spent,” Comer said.

Comer requested a series of documents and communications about the unemployment benefits program from the California Department of Employment Development, which administers the state system. No Californians are due to appear on Wednesday.

In recent years, EDD has strengthened its fraud detection program. In November, EDD reported that 1,713 fraud investigations had been opened over the past three years. There have been 296 convictions and more than $1.1 billion seized or recovered so far as pandemic fraud investigations continue.

Job losses pile up

California, like many other states, found itself overwhelmed in 2020 as the pandemic pushed the state’s unemployment rate to historic highs.

With unemployment rising nationwide, Washington created the Pandemic Unemployment Assistance Program, which provided benefits to people who were not traditionally eligible, such as independent contractors.

EDD was inundated with claims and quickly sent out payments.

The program was plagued by massive fraud, much of which was apparently engineered by prisoners and organized crime interests. The federal program lacked the traditional guarantees of regular state unemployment insurance programs.

California officials estimated that at least $20 billion had been wrongfully paid, the vast majority of it in new federal programs, and lamented that it would be difficult to recover most of that sum.

Is Newsom to blame?

Comer makes it clear that he believes California’s predicament cannot be blamed solely on federal government policies and practices.

“Governor (Gavin) Newsom and agency officials have tried to distract by accusing the federal government of increasing unemployment benefits during the pandemic and relaxing eligibility rules,” he said. Comer said in a statement. three page letter to Nancy Farias, director of the state’s Department of Employment Development, which administers California’s unemployment program.

Among the items it looks for are information regarding efforts to prevent the payment of fraudulent claims, to recover wrongfully paid claims, and to identify the total number of wrongly paid claims.

Comer cited a January 2021 report by then-state auditor Elaine Howle, which concluded that “the federal government warned the state at least three times during the first months of the pandemic to strengthen its protection against fraud”.

The bee reports at the time Howle discovered that more than 1,700 complaints came from a single address.

California residents had discovered since the summer of 2020 that they were receiving mailings with unknown names from EDD. The audit found that as of December 2020, the agency was still “allowing claimants to continue collecting benefits using suspicious addresses because it was not establishing payment blocks for their claims.”

Comer also quoted Julie Su, then Secretary of Labor, who said in January 2021 during an EDD conference call“There’s no sugar coating the reality that California didn’t have enough security measures in place to prevent this level of fraud.”

Su is now the US Undersecretary of Labor.

Who committed fraud?

The Newsom administration named McGregor Scott, the former U.S. attorney for the Eastern District of California, special counsel to coordinate efforts to catch and prosecute those involved in the schemes. At the time, it listed five types of fraud:

▪ Transnational organized crime. Scott called it “probably the biggest,” powered by the dark web, he said, with social security numbers readily available for purchase.

▪ National organized crime. He suggested that “mainstream street gangs have figured this out and are getting money, or have gotten money, and are using it to facilitate their nefarious businesses”.

▪ Scratchers. These are people who spend their lives trying to find ways to steal from the government and various insurance programs.

▪ Various.

▪ The prison population. In one instance, the U.S. Attorney’s Office described a case involving women who had been incarcerated at the Central California Women’s Center in Chowchilla.

They said one inmate sent her own personal identifying information and that of several other inmates to submit unemployment insurance claims on their behalf. The claims stated that the inmates had held various freelance jobs, which turned out to be false since they were in prison and therefore ineligible for benefits.

As federal pandemic programs have come to an end, EDD has taken several steps to strengthen its overall fraud detection methods.

He launched an identity verification system, ID.me, and estimates that it has prevented more than $125 billion in fraud attempts. EDD said its special counsel worked with ID.me to “refer cases of fraudulent claims to law enforcement.”

The agency also said it cooperates with vendors and data scientists to “identify potentially fraudulent claims using state-of-the-art data analytics and to refer these cases to law enforcement for investigation. further”.

And it works with Thomson Reuters to cross-check unemployment claims against law enforcement databases.